On June 11, Pakistan’s government unveiled its first annual budget for fiscal year 2019-2020, however it took till June 28 to pass it. The lengthy delay was caused by strong opposition in parliament, which threatened to hold protests against the government’s alleged economic incompetence.
Pakistan’s current economic position is concerning. The Pakistan Economic Survey, a government-issued assessment that comes out before the yearly budget presentation, paints a bleak image of the home economy this year.
Almost every financial indicator has been trending south. The growth rate dropped by nearly half, from 6.2 percent to 3.3 percent. It is predicted to fall even further to 2.4 percent next year, the lowest level in the country in ten years. Since the start of the fiscal year, the Pakistani rupee has lost a fifth of its value against the dollar. Over the following 12 months, inflation is predicted to linger above 13%, marking a 10-year high.
Then there’s the issue of the growing debt, which consumes almost 30% of the budget each year. Pakistan continues to take out loans in order to make payments on previous debts. It just agreed to another rescue package for $6 billion with the International Monetary Fund (IMF).
Prime Minister Imran Khan proposed the formation of a special commission to study why the government is so in debt in a televised address following his budget presentation.
Khan, on the other hand, does not need to go any further than his own government’s budget to discover the heart of the problem: the country has limited revenue streams and excessive non-development expenditures, which is a formula for financial disaster.
Pakistani authorities have struggled to create effective tax collecting systems for decades. Pakistan currently has one of the lowest tax-to-GDP ratios in the world, with only 1% of the population paying taxes.
Because successive governments have been headed by members of the same elites who are deliberately avoiding taxes, tighter measures have been avoided. They are able to do so not only as a result of passivity on the part of the administration, but also as a result of pervasive corruption. Bribing is actually cheaper for them than paying their dues.
As a result, the poor in Pakistan bear the brunt of the tax burden, which they pay in different indirect ways and who are already struggling to make ends meet. A third of the population is currently living in poverty.
Before taking office, Khan promised to crack down on tax evasion and corruption, but little has been done thus far. He has not, for example, introduced any measures to combat corruption inside his own party. A member of Khan’s cabinet recently admitted to evading taxes for years by transferring his luxurious properties to one of his subordinates, but no action has been taken against him so far.
Given this selective justice, it’s no surprise that the government’s recent tax amnesty program, in which tax debt is pardoned in exchange for a fee, failed to take off.
While Khan’s government fails to increase revenue, it equally fails to reduce non-developmental spending.
The military, which receives between 18 and 23 percent of the budget each year, is the largest source of such spending after debt service.
The military obtains cash from the state budget in addition to earnings from its significant business operations, which include over 50 commercial firms with a combined yearly revenue of $1.5 billion. It has just recently entered the mining and oil and gas exploration industries, with some assistance from Khan’s government.
So, despite its wealth, Pakistan’s army continues to be a drain on the country’s economy and receive special treatment. There are no indications that this will alter under the present administration.
Khan announced the formation of a new council, the National Development Council, to supervise Pakistan’s economic growth strategy earlier this month. Apart from a handful of ministers with related responsibilities and senior government officials, the army chief is also a member of the council, implying that the military will be involved in future economic decisions.
Khan also declared that the military will take a voluntary budget cut a few days before the yearly budget was submitted to parliament, citing the economic instability as the reason. However, when the budget specifics were made public, it was discovered that the army’s budget had increased by 17.6 percent over the previous year. As a result, some have claimed that the earlier declaration was really a public relations stunt designed to deceive Pakistan’s international creditors, such as the IMF, who have encouraged the government to reduce non-development spending.
Despite the constant pressure from the outside world, defense spending remains a top priority. The stated explanation for this approach is always the alleged threat posed by neighboring countries, which the military helps to prolong in various ways.
Although both Afghanistan and India are frequently mentioned in the local mainstream media as sources of national security threats, the fact that militant groups targeting these two nations are allowed to organize on Pakistani soil is frequently neglected.
Their existence keeps low-intensity disputes with neighbors going, which neatly excuses greater military spending to safeguard Pakistan from “foreign foes.”
As a result, Pakistan appears to be trapped in a vicious loop of satisfying the army’s and powerful economic elites’ demands, crippling the country’s economy and forcing it to continue borrowing from international creditors, sliding deeper into debt and edging closer to full economic collapse.
Those in positions of authority and those with economic advantages must recognize that the current quo is unsustainable at this point. The only way out is for a just tax system to be implemented, as well as a cut or at the very least a freeze in the ever-increasing military budget.
If Pakistan is to avert economic calamity, it must review existing spending and prioritize expenditures that would genuinely promote social and economic progress and uplift the poor, rather than merely the civilian and military elites.
What are the reasons for Pakistan’s economic slowdown?
Currency and forex crises Pakistan has been plagued by macroeconomic crises in the past, including rampant inflation, current account and trade deficits, decreasing foreign reserves, and currency devaluations. It is once again confronted with a combination of these issues.
Why is Pakistan deteriorating?
Environmental issues in Pakistan, such as erosion, the usage of agrochemicals, and deforestation, all contribute to the country’s expanding poverty. Pollution increases the danger of toxicity, and the country’s inadequate industrial standards contribute to the rise in pollution.
Is Pakistan’s economy improving?
WASHINGTON: According to a World Bank research released on Wednesday, growth in Pakistan surprised on the upside last year, owing to improved internal demand, record-high remittance inflows, narrow lockdown targeting, and accommodating monetary policy.
As pandemic-related disruptions dissipate, GDP in the South Asian region (SAR) would surge to 7.6% in 2022, according to the bank’s Global Economic Prospects report 2022, before declining to 6.0 percent in 2023.
Because of these factors, the World Bank has changed its growth predictions for the area since June 2021 “Bangladesh, India, and Pakistan have improved chances.”
According to the analysis, Pakistan’s economy would grow by 3.4 percent this fiscal year and by 4 percent in 2022-23, owing to structural reforms that will improve export competitiveness and the financial viability of the power industry.
India’s economic growth is expected to be 8.3% this fiscal year and 8.7% in 2022-23, according to the report. The current fiscal year’s 8.3% GDP growth is the same as what the bank predicted in October 2021.
According to the analysis, India’s growth rate will be higher than that of its immediate neighbors in the current and next fiscal years. Bangladesh’s growth is expected to be 6.4 percent in 2021-22 and 6.9 percent in 2022-23, according to the bank, while Nepal’s is expected to be 3.9 percent this fiscal year and 4.7 percent next.
The research also warns that global economic growth will fall to 4.1 percent this year from an expected 5.5 percent in 2021 “Economic disruptions caused by Omicron might cut growth to as low as 3.4 percent. According to the research, real interest rates in Pakistan fell sharply in 2020 and remained negative through 2021. According to the research, both Bangladesh and Pakistan’s goods trade deficits reached new highs as a result of robust local demand and rising energy prices.
In SAR, monetary policy became more accommodating as real interest rates fell further due to increased inflation expectations, but policy rates remained low. In Pakistan, the tendency was only reversed after a sharp hike in policy rates.
However, due to economic constraints in Pakistan, real expenditure contracted in 2021.
The paper also examines the Taliban’s August takeover of Afghanistan, noting that it resulted in a sudden stop of international grant support as well as a loss of access to abroad assets and the international banking system, resulting in a humanitarian and economic disaster.
Food and energy imports to Afghanistan were also disrupted by the crisis, which resulted from a lack of foreign exchange and financial sector failure.
“Prices for basic household commodities, like as food, are fast rising, while private sector activity is collapsing, according to the research. “The humanitarian response is being restricted by the collapse of the financial sector and an inability to move monies internationally.
Long-term bond rates in Pakistan and Sri Lanka have significantly increased in late 2021, reversing the epidemic lows.
Pakistan’s monetary accommodation was removed due to high inflation. Except in Pakistan, where excessive inflation led to the withdrawal of monetary accommodation, the research forecasts the region’s monetary policy to tighten but remain moderately supportive in 2022.
Although SAR may continue to catch up to advanced-economy per capita incomes in the foreseeable period, the rate of advancement will be slower than in the decade prior to the pandemic. SAR’s expansion is also being hampered by fiscal issues in Pakistan and Sri Lanka. Bhutan, Nepal, Pakistan, and Sri Lanka’s per capita incomes may slip farther behind leading nations in 2021-23.
Without India, output in the subregion could be roughly 4% below pre-pandemic forecasts in 2023.
What is Pakistan’s GDP forecast for 2022?
According to our econometric models, Pakistan’s GDP will trend around 292.00 USD billion in 2022 and 310.00 USD billion in 2023 in the long run. The gross domestic product (GDP) is a measure of a country’s economic output and income.
In 2025, what would Pakistan’s GDP be?
Pakistan’s GDP (gross domestic product) is expected to reach US$261.70 billion in 2025. By 2025, Pakistan’s real total GDP (gross domestic product) is predicted to expand by 1.89 percent. Pakistan’s GNI (gross national income) is expected to reach US$255.61 billion in 2025.
Is Pakistan’s economy expected to improve in 2021?
ISLAMABAD, Pakistan, October 28, 2021 According to a new World Bank report issued today, Pakistan’s economy improved in Fiscal Year 2021, in part because to the government’s effective deployment of targeted lockdowns to manage the spread of COVID-19 while allowing economic activity to mostly continue.
Is India or Pakistan the poorer country?
With a GDP of $2,709 billion dollars in 2020, India’s GDP will be about ten times that of Pakistan’s $263 billion dollars. The disparity is larger in nominal terms (almost ten times) than in ppp terms (8.3 times). In nominal terms, India is the world’s fifth largest economy, while in ppp terms, it is the third largest. Pakistan has a nominal ranking of 48 and a PPP ranking of 24. Maharashtra, India’s most economically powerful state, has a GDP of $398 billion, far exceeding Pakistan’s. Tamil Nadu, India’s second-largest economy ($247 billion), is relatively close. The gap between these two countries was at its narrowest in 1993, when India’s nominal GDP was 5.39 times that of Pakistan, and at its widest in 1973. (13.4x).
In terms of gdp per capita, the two countries have been neck and neck. For only five years between 1960 and 2006, India was wealthier than Pakistan. In 1970, Pakistan’s GDP per capita was 1.54 times that of India. Since 2009, the margin has widened in India’s favor. On an exchange rate basis, India’s per capita income was 1.56 times more than Pakistan’s in 2020, with an all-time high of 1.63x in 2019. The previous year, Pakistan was wealthier than India. Both countries rank near the bottom of the world in terms of GDP per capita. India is ranked 147 (nominal) and 130 (absolute) (PPP). Pakistan is ranked 160 (nominal) and 144 in the world (PPP). There are 28 Indian states/UTs that are wealthier than Pakistan.
In 2020, India’s gdp growth rate (-7.97) will be lower than Pakistan’s (-0.39) after 19 years. India’s GDP growth rate reaches a high of 9.63 percent in 1988 and a low of -5.24 percent in 1979. Pakistan’s inflation rate peaked at 11.35 percent in 1970 and peaked at 0.47 percent in 1971. Pakistan expanded by more than 10% in three years from 1961 to 2017, while India never did. India’s GDP growth rate has been negative for four years, whereas Pakistan’s growth rate has never been negative.
According to the CIA Fackbook, India’s GDP composition in 2017 was as follows: agriculture (15.4%), industry (23%), and services (23%). (61.5 percent ). Agriculture (24.7 percent), Industry (19.1 percent), and Services account for the majority of Pakistan’s GDP in 2017. (56.3 percent ).
Is Pakistan developing?
PAKISTAN, ISLAMABAD (September 22, 2021) As commercial activity progressively restarts in the second year of the coronavirus disease (COVID-19) pandemic, Pakistan’s economic growth rebounded to 3.9 percent in fiscal year (FY) 2021 (ending 30 June 2021) and is predicted to reach 4.0 percent in FY2022, according to the Asian Development Bank (ADB).
In 2021, what would India’s GDP be?
In its second advance estimates of national accounts released on Monday, the National Statistical Office (NSO) forecasted the country’s growth for 2021-22 at 8.9%, slightly lower than the 9.2% estimated in its first advance estimates released in January.
Furthermore, the National Statistics Office (NSO) reduced its estimates of GDP contraction for the coronavirus pandemic-affected last fiscal year (2020-21) to 6.6 percent. The previous projection was for a 7.3% decrease.
In April-June 2020, the Indian economy contracted 23.8 percent, and in July-September 2020, it contracted 6.6 percent.
“While an adverse base was expected to flatten growth in Q3 FY2022, the NSO’s initial estimates are far below our expectations (6.2 percent for GDP), with a marginal increase in manufacturing and a contraction in construction that is surprising given the heavy rains in the southern states,” said Aditi Nayar, Chief Economist at ICRA.
“GDP at constant (2011-12) prices is estimated at Rs 38.22 trillion in Q3 of 2021-22, up from Rs 36.26 trillion in Q3 of 2020-21, indicating an increase of 5.4 percent,” according to an official release.
According to the announcement, real GDP (GDP) or Gross Domestic Product (GDP) at constant (2011-12) prices is expected to reach Rs 147.72 trillion in 2021-22, up from Rs 135.58 trillion in the first updated estimate announced on January 31, 2022.
GDP growth is expected to be 8.9% in 2021-22, compared to a decline of 6.6 percent in 2020-21.
In terms of value, GDP in October-December 2021-22 was Rs 38,22,159 crore, up from Rs 36,22,220 crore in the same period of 2020-21.
According to NSO data, the manufacturing sector’s Gross Value Added (GVA) growth remained nearly steady at 0.2 percent in the third quarter of 2021-22, compared to 8.4 percent a year ago.
GVA growth in the farm sector was weak in the third quarter, at 2.6 percent, compared to 4.1 percent a year before.
GVA in the construction sector decreased by 2.8%, compared to 6.6% rise a year ago.
The electricity, gas, water supply, and other utility services segment grew by 3.7 percent in the third quarter of current fiscal year, compared to 1.5 percent growth the previous year.
Similarly, trade, hotel, transportation, communication, and broadcasting services expanded by 6.1 percent, compared to a decline of 10.1 percent a year ago.
In Q3 FY22, financial, real estate, and professional services growth was 4.6 percent, compared to 10.3 percent in Q3 FY21.
During the quarter under examination, public administration, defense, and other services expanded by 16.8%, compared to a decrease of 2.9 percent a year earlier.
Meanwhile, China’s economy grew by 4% between October and December of 2021.
“India’s GDP growth for Q3FY22 was a touch lower than our forecast of 5.7 percent, as the manufacturing sector grew slowly and the construction industry experienced unanticipated de-growth.” We have, however, decisively emerged from the pandemic recession, with all sectors of the economy showing signs of recovery.
“Going ahead, unlock trade will help growth in Q4FY22, as most governments have eliminated pandemic-related limitations, but weak rural demand and geopolitical shock from the Russia-Ukraine conflict may impair global growth and supply chains.” The impending pass-through of higher oil and gas costs could affect domestic demand mood, according to Elara Capital economist Garima Kapoor.
“Strong growth in the services sector and a pick-up in private final consumption expenditure drove India’s real GDP growth to 5.4 percent in Q3.” While agriculture’s growth slowed in Q3, the construction sector’s growth became negative.
“On the plus side, actual expenditure levels in both the private and public sectors are greater than they were before the pandemic.
“Given the encouraging trends in government revenues and spending until January 2022, as well as the upward revision in the nominal GDP growth rate for FY22, the fiscal deficit to GDP ratio for FY22 may come out better than what the (federal) budget projected,” said Rupa Rege Nitsure, group chief economist, L&T Financial Holdings.
“The growth number is pretty disappointing,” Sujan Hajra, chief economist of Mumbai-based Anand Rathi Securities, said, citing weaker rural consumer demand and investments as reasons.
After crude prices soared beyond $100 a barrel, India, which imports virtually all of its oil, might face a wider trade imbalance, a weaker rupee, and greater inflation, with a knock to GDP considered as the main concern.
“We believe the fiscal and monetary policy accommodation will remain, given the geopolitical volatility and crude oil prices,” Hajra added.
According to Nomura, a 10% increase in oil prices would shave 0.2 percentage points off India’s GDP growth while adding 0.3 to 0.4 percentage points to retail inflation.
Widening sanctions against Russia are likely to have a ripple impact on India, according to Sakshi Gupta, senior economist at HDFC Bank.
“We see a 20-30 basis point downside risk to our base predictions,” she said. For the time being, HDFC expects the GDP to rise 8.2% in the coming fiscal year.